FAIL: Next-Gen Technology for Peak Energy Demand

None of the next-generation technologies currently available to help utilities meet peak demand — when people are using lights, heating and cooling and appliances at the same time — are a silver bullet, according to a report out from Lux Research this morning. The technology that unfortunately still wins out over energy storage, demand response and solar technology is the decades-old method of using expensive and carbon-emitting natural gas peaker plants. FAIL.

Lux finds that each of the next-gen peak demand technologies have unique benefits in terms of cost and capacity scale. For example demand response, where building operators either automatically or manually turn down their energy consumption at certain times of day, is by far the most cost-effective technology and is best positioned to replace natural gas peaker plants at really extreme peak periods (middle of Summer afternoon when people are blasting their air conditioning). Yet demand response can only be used for 1 percent of the time, because of the practical limits of deploying the technology.

Energy storage (FAQ), like compressed air, has the most potential to offer capacity, but Lux finds that the immature stage of the technology “cripples adoption.” It’s a “non-starter today on cost and bankability,” says Lux. While compressed air, pumped hydro, and various types of batteries are actually decades-old technology, they are far too expensive right now.

Solar technology being used to generate power at peak demand, is the second most economic option out of the three — well, thanks to subsidies. But because of the limiting factor, (there’s only so many rooftops and utilities willing to invest), solar can only supply 23 to 30 percent of the capacity to allay peak demand.

So currently “natural gas will continue to win the peak for years to come,” says Lux. Bummer, because natural gas peaker plants are themselves expensive, and of course are based on a fossil fuel and emit carbon. Lux finds that in order for demand response, solar and energy storage to become more attractive, p”olicymakers need to better align subsidies for wind and solar with their actual cost to utilities.”

For more research on smart grid technology check out GigaOM Pro (subscription required):